By Geoffrey Smith
Investing.com --- The global rally in stocks cools, but the one in oil and Bitcoin continues. France goes after more tax from U.S. tech giants, and the ECB warns that the banking situation in the euro zone isn't as good as third-quarter reports might have you believe. Plus it's a heavy data day as the U.S. moves up all of Thursday's usual releases to Wednesday because of Thanksgiving. Topping the bill - weekly jobless claims and revised data for third-quarter GDP. Here's what you need to know in financial markets on Wednesday, November 25th.
1. Jobless claims, Q3 GDP revision due
After a quiet start to the week, the U.S. data calendar gets busy today with the top release being initial and continuing jobless claims at 8:30 AM ET (1330 GMT).
Initial claims rose for the first time in six weeks last week, and investors will be on the lookout for any sign of that becoming a trend as the economy weakens under the current surge in Covid-19 cases.
Also due out at 8:30 are durable goods orders for October, and a second reading of gross domestic product data for the third quarter. At 10 AM, there will be the University of Michigan’s consumer sentiment index, new home sales data for October and figures for personal income and spending in October.
2. France revives digital tax collection; EU moves on data protection
France said it will start to collect the digital services tax that it enacted earlier this year in an effort to squeeze more out of Internet giants such as Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), which routinely channel their profits made in larger EU countries into smaller jurisdictions with lower tax rates.
The move is the latest illustration of the challenges facing the new Biden administration. The Trump administration had threatened to retaliate with import tariffs on French luxury goods if France pushed ahead with its plans. However, since most retailers have already imported their inventories for the holiday season, it looks likely that any retaliation would not affect sales in the near term.
Elsewhere in Europe, the EU Commission proposed new legislation aimed at tightening European control over government and industrial data.
3. Stock rally cools overnight. U.S. set to open mixed
The global stock market rally weakened overnight after U.S. markets roared to record highs on hopes for a vaccine-driven economic rebound in 2021.
Most Chinese stock indices lost over 1%, while European markets shed up to 0.5% in what was still only a modest correction after the gains of recent weeks.
U.S. stocks are also indicated to open slightly lower, with Dow Jones Futures down 65 points, or 0.2%, by 6:30 AM ET (1130 GMT), and S&P 500 Futures down 0.1%. NASDAQ Futures were outperforming with a gain of 0.2%.
The Dow and S&P had finished at record highs on Tuesday in extraordinarily high volume, as retail traders in particular piled into unloved value stocks that many expect to outperform as the real economy recovers next year. Stocks likely to be in focus early include Dell and HP, both of which beat market expectations with their quarterly updates after the bell on Thursday as the working from home trend drove strong sales of PCs and laptops.
4. ECB warns on asset prices, credit losses
The European Central Bank warned that Eurozone banks are by no means out of the woods, despite the prospects for a recovery next year.
The ECB warned in its semiannual Financial Stability Review that the risk of a broad asset price correction had risen after the rallies seen this year in markets from bonds to house prices and beyond.
It also suggested that the healthy-looking balance sheets presented by banks at the end of the third quarter were flattered by government and regulatory support schemes, and warned that actual loan losses may be higher than the banks expect.
Such warnings suggest that the lifting of the ECB’s ban on bank dividends and buybacks at the end of the year is far from assured. In a separate interview, board member Yves Mersch said that while a blanket ban may not survive beyond the end of the year, it’s likely to be replaced by a ‘case-by-case’ approach. The Stoxx 600 Banks index fell around 1.5% in response.
5 Oil, bitcoin rally continues; EIA inventories eyed
Crude oil and Bitcoin were among the few assets that continued to rally overnight, both of them ultimately driven by the prospect of excess liquidity from central banks, but oil also supported by hopes of a real rebound in demand next year.
By 6:40 AM ET, U.S. Crude futures were up 0.6% at $45.17 a barrel, having earlier hit a new eight-month high of $45.67 a barrel. Brent crude futures were up 0.5% at $48.04 a barrel.
The day’s focus is likely to be the publication of the Energy Information Administration’s weekly stockpiles report at 10:30 AM ET. Data from the American Petroleum Institute on Tuesday had suggested that crude inventories rose 3.80 million barrels last week – a reminder of weak near-term fundamentals that were lost in Tuesday’s blistering risk rally.